Insurance Industry Slow to Adopt Internet

The insurance industry is showing a lingering ambivalence toward the Internet and will lose some of its market share as a result, according to survey on electronic commerce in the industry by META Group.

Survey respondents represents all segments of the insurance industry: life, health, property and casualty, reinsurance, and large multiline companies. Eighty-four percent of the respondents say they are planning or are undertaking an Internet-based joint venture, though only 24 percent have an aggregator site presence. A similar are planning, developing, or have implemented a secure extranet. In addition, 95 percent use an intranet for corporate communications, and two-thirds of respondents intranets are or will be utilized for publishing information to distribution channels.

“The insurance industry seems to have a schizophrenic view of e-commerce and e-business,” said META Group’s Judy Johnson. “Companies are moving ahead with intranets and secure extranets, and more than 90 percent of survey respondents claim to have an enterprise e-business strategy implemented, under development, or in the planning stages. Yet, at the same time, nearly half of our survey respondents cite ‘lack of an e-business strategy’ as the number one or number two concern about doing e-business. They say they expect great things from e-business — such as process efficiencies and improved customer service (94 percent), competitive positioning advantages (88 percent), and lower customer acquisition costs (77 percent) — but then express a resistance to change.”

Despite investments in intra/extranets and Web-related initiatives, close analysis of the survey responses indicates insurers are not aligning business and IT e-commerce-related training and activities.

According to Johnson, the IT and business segment of the insurance industry are focused on hard skills, and lack an understanding of skills such as project management. The survey also found that many companies are dumping Internet and e-commerce initiatives into the laps of IT and marketing personnel with minimal direction from the top.

The survey also found that the insurance industry suffers from an expectation that brand loyalty will be accentuated without a plan for either making that happen, or measuring results. Although 24 percent of the respondents have an aggregator site presence, they do not know what, if any, benefits, are being gained from it for lead generation/sales or brand recognition, because there are no measurement criteria being applied.

“Our survey indicates the industry has not embraced e-commerce as anything other than a series of Internet-related initiatives that are not necessarily meshed with business or marketing strategies,” Johnson said. “Insurers are looking at e-commerce as a technology-based alternative channel and are not asking the critical question, ‘What business are we in, and how will that be conducted?’ This resistance to redefine the industry for a potentially very different future puts the insurance industry at risk. Others, financial services leaders and others coming in from the outside, have already faced or are facing this issue and are positioning themselves to exploit insurers’ hesitancy.”

By 2005, the META Group predicts that banks and financial services will leap from owning less than 1 percent of the US insurance market to commanding a 10 percent share. Upstart virtual insurers and direct players with more flexibility will capture an additional 2-5 percent of the market from the current leaders.